Hosted software boom looms

Analyst boosts prospects for ASPs

Forrester Research has given application service providers (ASPs) a boost by advising companies hit by the economic downturn to look towards hosted and subscription-based software usage.

However, the analyst firm also warned that resellers and vendors will lose out if unused licences are dumped by companies which have shed large numbers of staff.

Bob Chatham, principal analyst at Forrester, said: "Firms are saddled with extra costs from unused software licences left over from incomplete implementations and employee downsizing.

"The result is a liability for both resellers and customers. Vendors must assist with audits and offer like-value exchanges."

Customers need to be able to scale up and down the use of a product, he explained. "ASPs can offer a price per month per employee. It is not a capital expenditure and this doesn't change the challenge for channel partners," he said, claiming that reselling a subscription is no different to selling licences.

"Moving to a subscription base makes revenue more predictable for resellers," he added.

According to figures released by analyst IDC, ASP services will generate $7.8bn in turnover by 2004.

Jeff Maynard, founder and chief technologist at ASP Netstore, maintained that a "key benefit" of software-as-a-service is flexibility. "It neatly solves the current problem facing many companies during the economic downturn," he said.

Sending back unused copies of software is generally not possible, but it is possible to reduce the number of seats rented from an ASP, Maynard said.

"ASP customers can turn new users on and old users off as and when required. Combining this flexibility with the fixed pricing structure of software-as-a-service can make the jobs of IT managers and financial controllers that much easier," he claimed.